Risk Taking Begets Risk Taking: Evidence from Casino Openings and Investor Portfolios
49 Pages Posted: 5 Aug 2015 Last revised: 30 Sep 2017
Date Written: September 27, 2017
This paper provides evidence that a change in the surrounding risk-taking environment, via increased casino access, affects investors' subsequent willingness to take portfolio risk. Using the initial legalization and opening of commercial casinos in the United States as a quasi-natural experiment and investor-level brokerage data, we find that after a casino opens in close geographical proximity to investors, individuals likely to visit a casino and gamble increase their idiosyncratic portfolio risk by 12.86% relative to those unlikely to gamble. This effect lasts for approximately 3 months and does not result in higher subsequent portfolio returns.
Keywords: investor behavior, portfolio risk taking, gambling
JEL Classification: D10, G10
Suggested Citation: Suggested Citation